The program allows borrowers to challenge loan repayment based on actions or omissions by the school, such as tax refund offsets or wage garnishment. The changes to the rule at issue involve expanding the look-back period for loan discharges based on school closures and making it easier for borrowers to receive automatic discharges.
In April, the Fifth Circuit ruled in favor of a preliminary injunction, siding with the Career Colleges and Schools of Texas, which argued that members of the organization would suffer irreparable harm from the new rules. The court believed the plaintiffs demonstrated a likelihood of harm without a delay in the rule’s effective date.
The Education Department argues that the Fifth Circuit’s decision effectively invalidates the long-standing method of assessing borrower defenses. The department also sought to have the Supreme Court review whether the district court should have issued preliminary relief universally, though the Court did not consider this issue.
The changes in the 2022 rule also include provisions on school closures, including a shorter period for automatic loan discharges based on these closures. The Career Colleges and Schools of Texas maintains that the rule unlawfully empowers the Education Department to cancel student loans rather than allowing borrowers to defend against repayment.
